Property price cuts to accelerate on back of UOB’s Sentosa lawsuit

It's only a matter of time before prices drop.

In spite of several rounds of cooling measures, developers have managed to evade a meaningful correction in property prices by wooing buyers with incentives. But price cuts are expected to accelerate thanks UOB’s landmark lawsuit against Lippo Group, which will chip away at the developers’ marketing tactics.

According to Nomura, the case will cause developers to think twice before attempting to lure hesitant buyers with such incentive schemes.

Apart from this, the clock is also ticking for many developments which will soon be subject to the ABSD rule, which levies hefty fines on unsold projects.

“While it appears most developers are still adopting a wait-and-see approach, we think this is likely to
change in 2015F, because: 1)time is running down on projects affected by the ABSD rule, 2) lower prices could encourage the government to re-think its housing policy, and 3) the developers still have margin to
lower prices,” stated Nomura.

“We reiterate our view that with developers more proactive in lowering headline prices in 2015F, this should in turn 1) stimulate higher sales volume, especially for projects with an average price point of SGD2mn/unit and lower, and 2) prepare the ground for the government to ease policy towards the end of 2015F,” the report added.